What is compound interest?

Compound interest means you earn interest on your interest as well as your principal. Over time this creates exponential growth — the longer you save, the more powerful the effect becomes.

How often does interest compound?

It depends on the account. Daily compounding gives a slightly higher effective rate than monthly or annual. Most UK savings accounts compound monthly or annually. Use the AER (Annual Equivalent Rate) to compare accounts fairly.

What is the Effective Annual Rate (EAR)?

The EAR (also called AER) shows the true annual return after accounting for compounding. It lets you compare accounts compounding at different frequencies on equal terms.

Compound Interest Calculator

See how compound interest grows your savings over time. Enter your principal, interest rate, compounding frequency, and investment term to calculate your final balance and total interest earned.

How it's calculated

A = P × (1 + r/n)^(n×t)
where P = principal, r = annual rate, n = compounds per year, t = years
EAR = (1 + r/n)^n − 1

Frequently Asked Questions

What is compound interest?: Compound interest means you earn interest on your interest as well as your principal. Over time this creates exponential growth — the longer you save, the more powerful the effect becomes.
How often does interest compound?: It depends on the account. Daily compounding gives a slightly higher effective rate than monthly or annual. Most UK savings accounts compound monthly or annually. Use the AER (Annual Equivalent Rate) to compare accounts fairly.
What is the Effective Annual Rate (EAR)?: The EAR (also called AER) shows the true annual return after accounting for compounding. It lets you compare accounts compounding at different frequencies on equal terms.